The Baucus Plan: State Insurance Regulation, National Plans
One of the big questions with insurance offerings is who regulates the plans, and how. Currently, regulation is done at the state level. Republicans don't like this, and neither do Democrats, and neither do insurers. It means every insurer needs to offer different plans in every state. Fragmentation and inefficiency, thy name is America's health-care system.
Republicans want insurance companies to be able to sell across state lines, using the regulations of the state where they're based. This is pretty much what happens in the credit card industry, and it's why most companies are headquartered in South Dakota: The regulations are virtually nonexistent, allowing for all manner of chicanery.
Democrats, conversely, want the regulations to be federal in nature. One single standard that all plans have to meet. Baucus's bill allows for both.
To satisfy the Republicans, Baucus creates "health care choice compacts." These are agreements between different states to allow insurers to sell across their lines. California, Nevada and Wyoming, for instance, could form a compact, and insurers based in Wyoming could sell a product conforming to Wyoming's regulatory standards in all three states. The voluntary nature of the compacts is important here: California presumably wouldn't want to partner with Alabama, as that would junk all the regulations they've built over the years.
To satisfy the Democrats, Baucus's bill allows for the creation of "national plans." The bill directs "The National Association of Insurance Commissioners (NAIC), in consultation with consumer groups, business interests, including small businesses, the insurance industry, federal regulators, and benefit experts" to create a uniform set of benefit standards that insurers would have to meet to offer a national plan. Once met, that plan could be offered in every state, as it would preempt state regulations. Presumably, that plan would also have more bargaining power and substantial efficiencies of scale, as it will be national, rather than confined to a single state. This could prove seriously transformative in the private insurance market.
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